Payout Amounts will Vary
Roughly 6,233 pilots employed by Delta Air Lines, Inc. have
opted to sell their individual portions of a $2.1 billion unsecured
bankruptcy claim the carrier gave them during pay negotiations in
2006.
Lee Moak, chairman of the executive committee for the Air Line
Pilots Association, sent a memo Thursday to the pilots about the
deal, but did not disclose just who is buying the claim
distributions. Union spokesman Buzz Hazzard described the buyers as
"institutional investors" and said he did not how many or who they
are, according to the Associated Press.
The Atlanta-based airline plans to exit Chapter 11 on April 30,
and the amounts of cash each eligible, participating pilot will
receive will vary. The average payout is said to be about $185,946
and is based on the total number of participants and the total
amount being paid for the claim distributions -- about $1.159
billion, which works out to about 60 cents on the dollar.
The cash distribution will be based on a pilot's years of
service, seniority and their current hourly pay rate, Hazzard
said.
The carrier's reorganization plan allows for unsecured creditors
to get between 62 percent and 78 percent of the amount of allowed
claims. Pilots declining the cash payout -- about nine percent --
of Delta's pilots, will retain their portion of the $2.1 billion
unsecured claim. Like any other unsecured creditor, they will
receive new shares of Delta stock once the company exits
bankruptcy.
"One of the
advantages in a claim sale is you get your cash up front and you
don't have to wait for the resolutions to take place," Hazzard
said.
In the April 2006 deal, in exchange for the $280 million in
average annual concessions made by Delta pilots, the airline agreed
to give the pilots $650 million in notes, conditioned upon
termination of the pilot retirement plan, that was later
terminated, and a $2.1 billion unsecured claim for retirement and
other payments or distributions.
The union has scheduled a meeting to discuss how the $650
million in notes will be distributed to the pilots, Hazzard
said.
A confirmation hearing on the airline's reorganization plan is
scheduled for April 25 in US Bankruptcy Court in New York. Since
the bankruptcy filing in September 2005, Delta now estimates it
will be worth $9.4 billion to $12 billion when it emerges from
Chapter 11.